DaVita Inc. Reports 1st Quarter 2004 Results
PRNewswire-FirstCall
EL SEGUNDO, Calif.
DaVita Inc.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020729/DAVITALOGO ) Financial and operating highlights include: -- Cash Flow: Operating cash flow for the quarter ended March 31, 2004 was $115 million and free cash flow was $109 million. For the rolling 12 months ended March 31, 2004 operating cash flow was $328 million and free cash flow was $287 million. These cash flow numbers exclude after-tax prior period Medicare lab recoveries of $12 million. -- Operating Income: Operating income for the quarter was $96.8 million. -- Volume: Total treatments for the first quarter were 1,657,055 or 21,381 treatments per day, an increase of 8.7% per day compared to the first quarter of last year. Non-acquired treatment growth was 4.1%. -- Center Activity: As of March 31, 2004, we operated or provided administrative services at 571 outpatient centers serving approximately 48,400 patients. During the first quarter we acquired 5 centers and opened 5 de novo centers. We also closed 2 centers and discontinued providing administrative services at 3 centers. Outlook
We are increasing our 2004 operating income target to $370 to $390 million.
DaVita will be holding a conference call to discuss its first quarter 2004 results on May 3, 2004, at 12:00 PM Eastern Time. The dial in number is 800 399-4406. A replay of the conference call will be available on DaVita's official web page, www.davita.com, for the following 30 days.
This press release includes non-GAAP financial measures, which we believe provide useful information to investors by excluding certain nonrecurring charges and prior period recoveries and by allowing consistency and comparability in our financial reporting to prior periods for which these non-GAAP measures were previously reported. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. Included in this press release is a reconciliation of these non-GAAP measures to the most comparable GAAP financial measures.
This release also contains forward-looking statements. Factors which could impact future results include the uncertainties associated with governmental regulation, general economic and other market conditions, and the risk factors set forth in the Company's SEC filings, including its Form 10-K for the year ended December 31, 2003. The forward-looking statements should be considered in light of these risks and uncertainties. These risks include those relating to:
-- the concentration of profits generated from PPO and private indemnity
patients and from the administration of pharmaceuticals,
-- possible reductions in private and government reimbursement rates,
-- changes in pharmaceutical practice patterns or reimbursement policies,
-- the Company's ability to maintain contracts with physician medical
directors, and
-- legal compliance risks, such as the ongoing review by the U.S.
Attorney's Office and HHS Office of the Inspector General in
Philadelphia.
The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
DAVITA INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share data)
Three months ended
March 31,
2004 2003
Net operating revenues $535,431 $459,807
Operating expenses and charges:
Patient care costs 363,429 316,710
General and administrative 42,604 36,787
Depreciation and amortization 20,270 17,445
Provision for uncollectible accounts 9,577 8,237
Minority interests and equity income, net 2,718 1,294
Total operating expenses and charges 438,598 380,473
Operating income 96,833 79,334
Debt expense 11,636 19,456
Other income 1,443 785
Income before income taxes 86,640 60,663
Income tax expense 33,775 24,250
Net income $52,865 $36,413
Earnings per share:
Basic $0.81 $0.60
Diluted $0.77 $0.52
Weighted average shares for earnings per share:
Basic 65,399,651 60,905,056
Diluted 68,588,969 78,772,410
DAVITA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
Three months ended
March 31,
2004 2003
Cash flows from operating activities:
Net income $52,865 $36,413
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 20,270 17,445
(Gain) loss on divestitures (628) 119
Deferred income taxes (1,016) 4,841
Non-cash debt expense 484 840
Stock option expense and tax benefits 14,389 1,378
Equity investment income (442) (519)
Minority interests in income of
consolidated subsidiaries 3,160 1,813
Distributions to minority interests (2,082) (2,465)
Changes in operating assets and liabilities, net
of effect of acquisitions and divestitures:
Accounts receivable (12,511) (676)
Medicare lab recoveries 19,000
Inventories 6,818 9,543
Other current assets 697 4,721
Other long-term assets 1,592 (2,457)
Accounts payable 8,843 (6,674)
Accrued compensation and benefits 2,393 (13,075)
Other current liabilities 1,779 11,952
Income taxes 5,315 16,641
Other long-term liabilities 5,190 809
Net cash provided by operating
activities 126,116 80,649
Cash flows from investing activities:
Additions of property and equipment, net (24,681) (21,708)
Acquisitions and divestitures, net (17,088) (718)
Investments in and advances to
affiliates, net 2,191 1,931
Intangible assets (360) (300)
Net cash used in investing activities (39,938) (20,795)
Cash flows from financing activities:
Borrowings 774,534 623,822
Payments on long-term debt (786,791) (478,659)
Net proceeds from issuance of common stock 17,578 3,502
Net cash provided by financing activities 5,321 148,665
Net increase in cash and cash equivalents 91,499 208,519
Cash and cash equivalents at beginning of period 61,657 96,475
Cash and cash equivalents at end of period $153,156 $ 304,994
DAVITA INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands, except per share data)
March 31, December 31,
2004 2003
ASSETS
Cash and cash equivalents $153,156 $61,657
Accounts receivable, less allowance
of $54,391 and $52,554 400,444 387,933
Medicare lab recoveries 19,000
Inventories 26,187 32,853
Other current assets 43,178 43,875
Deferred income taxes 66,530 59,740
Total current assets 689,495 605,058
Property and equipment, net 349,868 342,447
Amortizable intangibles, net 50,570 49,971
Investments in third-party dialysis businesses 3,348 3,095
Other long-term assets 9,179 10,771
Goodwill 947,894 934,188
$2,050,354 $1,945,530
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $80,711 $71,868
Other liabilities 118,643 112,654
Accrued compensation and benefits 101,652 100,909
Current portion of long-term debt 50,025 50,557
Income taxes payable 30,506 26,832
Total current liabilities 381,537 362,820
Long-term debt 1,105,277 1,117,002
Other long-term liabilities 24,500 19,310
Deferred income taxes 112,014 106,240
Minority interests 36,200 33,287
Commitments and contingencies
Shareholders' equity:
Preferred stock ($0.001 par value,
5,000,000 shares authorized; none issued)
Common stock ($0.001 par value, 195,000,000
shares authorized; 89,908,189 and 89,870,803
shares issued) 90 90
Additional paid-in capital 538,877 539,575
Retained earnings 441,993 389,128
Treasury stock, at cost (23,964,510
and 25,368,019 shares) (586,641) (620,998)
Accumulated comprehensive income valuations (3,493) (924)
Total shareholders' equity 390,826 306,871
$2,050,354 $1,945,530
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(dollars in millions, except for per share and per treatment data)
Q1 2004 Q4 2003 Q1 2003
Financial Results:
Net earnings excluding
refinancing charges and
Medicare lab recoveries for
prior years' services $52.9 $53.9 $36.4
Basic EPS $0.81 $0.84 $0.60
EPS assuming dilution $0.77 $0.79* $0.52
Operating income, excluding
Medicare lab recoveries $96.8 $97.2 $79.3
Operating income margin 18.1% 18.4% 17.3%
Other comprehensive income
Unrealized loss on securities,
net of tax of $1,641
and $590 $(2,569) $(924)
Business Metrics:
Volume
Treatments 1,657,055 1,666,225 1,503,031
Number of treatment days 77.5 79.5 76.4
Treatments per day 21,381 20,959 19,673
Per day year over year
increase 8.7% 8.5% 4.8%
Non-acquired growth 4.1% 4.3% 3.3%
Revenue
Total revenue $535 $553 $460
Less Medicare lab recoveries
for prior years' services $(24)
Revenue excluding Medicare
lab recoveries $535 $529 $460
Dialysis revenue per
treatment $311.02 $306.36 $296.31
Per treatment increase
from previous quarter 1.5% 0.0% 1.8%
Per treatment increase from
prior year 5.0% 5.3% 2.0%
Expenses
A. Patient care costs
Percent of revenue 67.9% 68.0% 68.9%
Per treatment $219.32 $216.04 $210.71
Per treatment increase
from previous quarter 1.5% 0.9% 2.2%
B. General & administrative
expenses
Percent of revenue 8.0% 7.6% 8.0%
Per treatment $25.71 $24.21 $24.48
Per treatment increase
(decrease) from previous
quarter 6.2% (1.5%) (8.9%)
C. Bad debt expense as a percent
of current-period revenue 1.8% 1.8% 1.8%
D. Consolidated effective tax
rate 39.0% 37.5% 40.0%
* The fourth quarter benefited from a year-to-date reduction in the
annualized effective tax rate that added $0.02 to fourth quarter
earnings per share.
DAVITA INC.
SUPPLEMENTAL FINANCIAL DATA, CONTINUED
(unaudited)
(dollars in millions, except for per share and per treatment data)
Q1 2004 Q4 2003 Q1 2003
Cash Flow
Operating cash flow, excluding
Medicare lab recoveries $114.5 $34.6 $80.6
Free cash flow, excluding
Medicare lab recoveries $108.7 $19.2 $70.1
Capital expenditures:
Development $19.2 $22.7 $11.9
Routine maintenance/IT/other $5.8 $15.4 $10.5
Acquisition expenditures, net $17.1 $30.4 $0.7
Accounts Receivable
Net receivables $400 $388 $346
DSO 70 69 69
Debt/Capital Structure
Total debt $1,155 $1,168 $1,464
Net debt, net of cash $1,002 $1,106 $1,159
Leverage ratio - last quarter
annualized (see Note 1) 2.1x 2.3x 3.0x
Shares repurchased (in millions) - 0.7 -
Average repurchase price - $34.20 -
Clinical (quarterly averages)
Dialysis adequacy - % of patients
with Kt/V > 1.2 94% 93% 92%
Anemia measure - % of patients
with HCT > 33 85% 85% 83%
Note 1. Leverage ratio is defined as net debt (total debt net of cash) to
operating income excluding depreciation, amortization, minority interests
and prior period Medicare lab revenue. The operating income
reconciliation is provided below.
DAVITA INC.
RECONCILIATIONS FOR NON-GAAP MEASURES
(unaudited)
(dollars in thousands)
1. Net earnings excluding refinancing charges and Medicare lab recoveries:
Q1 2004 Q4 2003 Q1 2003
Net earnings $52,865 $62,798 $36,413
Add back: Refinancing charges 9,261
Less: Medicare lab recoveries
for prior years' services (24,000)
Related income tax expense 5,837
$52,865 $53,896 $36,413
2. Operating income excluding Medicare lab recoveries, and excluding
depreciation, amortization, and minority interests:
Q1 2004 Q4 2003 Q1 2003
Operating income $96,833 $121,190 $79,334
Less: Medicare lab recoveries
for prior years' services (24,000)
$96,833 $97,190 $79,334
Add back: Depreciation and
amortization 20,270 19,985 17,445
Minority interests and
equity income, net 2,718 2,499 1,294
$119,821 $119,674 $98,073
3. Operating cash flow, excluding Medicare lab recoveries collected in the
period:
Rolling
12-Month
Period
ended Q1
Q1 2004 Q4 2003 Q1 2003 2004
Cash provided by operating
activities $126,116 $34,576 $80,649 $339,115
Less: Medicare lab recoveries
collected in the period (19,000) (19,000)
Related income tax expense 7,410 7,410
$114,526 $34,576 $80,649 $327,525
4. Free cash flow, excluding Medicare lab recoveries collected in the
period:
Free cash flow represents net cash provided by operating activities
less non-development capital expenditures. We believe free cash flow is
a useful adjunct to cash flow from operating activities and other
measurements under generally accepted accounting principles in the
United States since it is a meaningful measure of our ability to fund
acquisition and development activities and meet our debt service
requirements. Free cash flow is not a measure of financial performance
under generally accepted accounting principles in the United States and
should not be considered as an alternative to cash flows from
operating, investing or financing activities as an indicator of cash
flows or as a measure of liquidity.
Rolling
12-Month
Period
ended Q1
Q1 2004 Q4 2003 Q1 2003 2004
Cash provided by operating
activities $126,116 $34,576 $80,649 $339,115
Less: Expenditures for routine
maintenance and information
technology (5,816) (15,362) (10,490) (40,193)
Medicare lab recoveries
collected in the period (19,000) (19,000)
Related income tax expense 7,410 7,410
$108,710 $19,214 $70,159 $287,332
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SOURCE: DaVita Inc.
CONTACT: LeAnne Zumwalt, Investor Relations, DaVita Inc.,
+1-310-536-2420
Web site: http://www.davita.com/